Car accidents are one of the factors that insurance companies consider when they underwrite auto insurance policies, and being in an accident could affect your car insurance. If you're in an accident on the road, here's what could happen to your auto insurance policy as a result.
Cancellation of Your Existing Policy
The most severe action an insurance company can take is to cancel your current policy outright, but this is an uncommon scenario and almost never done purely because of an accident. Even if you cause a multi-vehicle pile-up that costs the insurer a lot, your policy still shouldn't be canceled solely on account of the accident.
What could lead to immediate cancellation of your policy, however, is a reckless driving action that led to the accident. For example, your policy might be canceled if you were under the influence of drugs or alcohol when you struck another vehicle. In this situation, the cancellation is because of the DUI that contributed to the accident.
If your policy is canceled, you'll lose auto insurance coverage effective immediately.
Nonrenewal of Your Current Policy
A more likely scenario is that your insurance company refuses to renew your auto insurance policy after a major accident.
In this situation, the insurer maintains your current policy until the end of its effective period. Once the policy's effective period reaches its terminal date, your insurance company might refuse to underwrite the same policy again. They'd refuse to renew the policy because you're now in a higher risk category and don't qualify for the same type of policy.
If your insurance company issues a nonrenewal notice, you'll have insurance coverage until your current policy closes. At the end of your current policy's effective period, you'll have to purchase a new auto insurance policy — and the new one will likely be more expensive because you're in a higher risk category.
Premiums Increase for Your Current Policy
If you cause a more minor accident, you may still qualify for the same type of insurance policy that you have now. You'll still present a slightly higher risk, though, so your insurance company might increase your premiums when the policy renews.
Your insurance company can't change your premiums in the middle of an effective period, but they can institute an increase when the policy renews. In this situation, you simply have to pay the higher premiums but can keep the same coverage.
For further questions about auto insurance, contact an insurance agency like Kesner Insurance Agency Inc.